BASF SE, the world's largest chemical company by sales, reported a sharp increase in profits in the third quarter on Friday, but warned that exchange-rate fluctuations will dent earnings growth in the fourth quarter.
The Ludwigshafen, Germany-based company said net profit in the three months to the end of September jumped 19% from a year earlier to ?.10 billion ($1.52 billion). Sales in the quarter rose 1.5% to ?7.73 billion.
The jump in profits - beating analyst expectations in the face of economic headwinds and exchange-rate fluctuations - could cheer investors as a sign that BASF's recent acquisitions to move into more profitable businesses are paying off.
Chief Executive Kurt Bock said in a statement that BASF would continue to restructure its portfolio through acquisitions and investment in production facilities. He added, however, that the company expects little help from the global economy, saying the economic environment will "remain challenging."
"We anticipate uneven development marked by economic uncertainty," he said, adding: "Currency effects will continue to negatively impact sales and earnings in the fourth quarter."
Mr. Bock added that despite the difficult economic conditions, BASF expects to report higher sales and earnings before taxes and special items for the full year.
BASF is the latest big European company to report that exchange-rate fluctuations put a dent in quarterly earnings, showing that companies are struggling with swings in the euro against major currencies such as the U.S. dollar and the Japanese yen. SAP AG, the German business software company, also reported this week that earnings were hit by currency fluctuations and warned of the impact of exchange rates in the fourth quarter.
BASF has launched a four-year drive to cut ? billion in costs by the end of 2015 to better compete with cheaper producers in Asia and growing competition from U.S. chemicals producers, which are benefiting from lower costs for raw materials in the wake of the shale-gas boom.
